Stamps.com 2005 Annual Report Download - page 34

increase net financing cash flows in periods after adoption. The amount of operating cash flows recognized in prior periods for such excess tax
deductions were $0 in 2005, 2004 and 2003.
In May 2005 the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections”(Statement 154), which replaces APB No. 20,
“Accounting Changes”, and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements”. Statement 154 applies to all
voluntary changes in accounting principle, and changes the requirement for accounting for and reporting of a change in accounting principle.
Statement 154 requires retrospective application to prior periods’ financial statements of a voluntary change in accounting principle unless it is
impracticable. APB No. 20 previously required that most voluntary changes in accounting principle be recognized with a cumulative effect
adjustment in net income of the period of the change. We do not anticipate the adoption of this statement to have a significant impact on our
financial position or results of operations.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
Our exposure to market rate risk for changes in interest rates relates primarily to our investment portfolio. We have not used derivative
financial instruments in our investment portfolio. Our cash equivalents and investments are comprised of money market, U.S. government
obligations and public corporate debt securities with weighted average maturities of 352 days at December 31, 2005. Our cash equivalents and
investments, net of restricted cash, approximated $103 million and had a related weighted average interest rate of approximately 3.6%. Interest
rate fluctuations impact the carrying value of the portfolio. We do not believe that the future market risks related to the above securities will
have a material adverse impact on our financial position, results of operations or liquidity.
Item 8. Financial Statements and Supplementary Data
Our financial statements, schedules and supplementary data, as listed under Item 15, appear in a separate section of this Report beginning
on page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9a. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer, Chief Financial Officer and
Chief Accounting Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Exchange Act). Based upon that evaluation, the Chief Executive Officer, Chief Financial Officer and Chief
Accounting Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in
timely alerting them to the material information relating to us required to be included in the reports we file or submit under the Exchange Act.
Changes in Internal Controls
During the fiscal quarter ended December 31, 2005, there has been no change in our internal control over financial reporting (as defined in
Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined
in Exchange Act Rule 13a-15(f) and 15d-15(f). Our internal control system was designed to provide reasonable assurance to our management
and Board of Directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter
how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance
with respect to financial statement preparation and presentation.
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